Credit Repair Options

Repair Credit Score

Some people live their lives keeping score. Others ignore scores entirely, preferring to simply enjoy the game. There's one score, however, that most adults simply cannot ignore. That's their credit score.

To buy expensive items, such as homes and cars, a credit score is essential. To get credit cards for general use or those from department stores and gasoline companies, credit scores are required. In many cases, a credit score determines which job or promotion we will or will not get.

Credit scores affect all aspects of all our lives and when our score is low, life can be difficult. A low score doesn't have to follow us around forever, like a black cloud hanging over our heads, though. Improvement is allowed and understanding these elements of credit reporting can help repair credit score for everybody.

Payment history influences credit score. To repair credit score, never make late payments. This definitely lowers the score.

Debt control is important, too. You can't live beyond your financial means and earn a good credit score. Never commit to total debt that requires paying more than 15% of your take-home pay. The only exception here is for mortgage payments, which are considered a different issue entirely.

Live a stable life. This means at least two years at the same address and on the same job. The longer the time at these two places, the higher the score.

Avoid debt re-aging, even if it sounds tempting. Say you're five months behind on a credit card payment. Under certain circumstances, a creditor can re-age your account to the current time. This means they will simply erase those five monthly payments so that you can begin making timely payments now. Do this only if you can surely and easily make payments on time and in full now. Federal law says you can re-age an account only once in a 12-month period and only two times in a five-year period. This isn't a game of poker; it's your life. Don't bluff your way through the re-aging process unless you are absolutely sure you won't need it more desperately later.

Be mindful of account balances. The closer a consumer is to reaching the limits of his or her lines of credit, the more likely the consumer is to getting in trouble. Remember the target of less than 15% of take-home pay for non-mortgage debts to earn the highest possible credit score.

Credit inquiries can be tricky. In some instances, they have no effect whatsoever on a consumer's credit score but, in other cases, they cause serious damage. No problems occur when the consumer routinely checks his or her credit rating, when an established creditor does so, a credit counseling agency does so, or when a credit bureau sells the consumer's credit info to another institution that checks for prescreening purposes. "Hard" inquiries, however, are not always good, especially when applications are denied. These inquiries occur every time a consumer applies for a line of credit - new card, new car, new credit-based account of any kind. This signals to the credit reporting agencies that the consumer is actively looking to go deeper into debt. A flurry of hard inquiries is thought to signal financial distress.

Don't close unused credit card accounts. Say Department Store A has issued you a line of credit for $5,000 but you haven't bought anything there in years and owe them no money at the moment. Your "MasterVista" credit card comes with a $10,000 line of credit and you pay it off in full every month. With Department Store B, your line of credit is another $5,000, of which you're using $3,000, and are making regular monthly payments. You're overall line of credit is the total of them all, or $20,000 ($5,000 each from Stores A and B plus $10,000 from MasterVista). If you close the unused account with Store A, your overall line of credit is reduced to just $15,000, an indication that your credit worthiness has dropped by $5,000, or 20%. This isn't good. Neither is closing an account in good standing you've had for many years, like the account with Store A. Your credit score will drop accordingly even though the account is not being actively used right now.

There's no hard and fast repair credit score formula. We're all enjoying the game of life from a different playing field. The plays that earn a high credit score are the same, however, so the more you know about the rules of that game, the sooner you'll go from underdog to champion.